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# Time Value

Time Value of Money
Imagine that a carton of Oregon Strawberry costs \$10, and you invest \$5 in a company that makes the produce. The investment yields and you capitalize this amount in a year.

time value of money
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a prudent decision.

time value
Because an option grants the holder a right, it has value for the holder. It represents a liability for the issuer. Option valuation is any procedure for assigning a market value to an option.

Time Value
The value of an option that captures the chance of further appreciation before expiration.

In essence, time value of money refers to the growth of 1 dollar as time increases. 1 dollar today is worth more 10 years down the road because it can earn interest payments. How much is 1\$ worth 10 years down the road?

~ of an option
Definition: [crh] The portion of an option's premium that is based on the amount of time remaining until the expiration date of the Definition: ion+contract"option contract, ...

~ is, as above, the difference between option value and intrinsic value, i.e.
~ = Option Value - Intrinsic Value.

Session IV - ~ of Money : An Overview

Description: Explains how to determine return of investments over a period of time
...

~ of Money is a fundamental concept in which money today is worth more than the same amount of money tomorrow. In other words, being given a \$100 bill today is not the same as being given a \$100 bill tomorrow, because you can deposit or invest that \$100 today.

~ of an Option
~ of an Option It is the part of the option's premium, which is based on the time remaining till expiry of the option's contract. During this time, the option's value may change depending on the movement of its underlying components.

~ Of Money: Because money invested in a security or deposited in a savings account will earn income over time, there is a value placed on the use of money for any given period. This value is represented, for example, by the rate of interest paid on a savings account.

~ - The part of the option premium derived from the volatility and the time remaining until expiration. It is the part of the option premium that is NOT the intrinsic value.

~
The portion of an option's value imputed to the possibility that the price of the underlying will move in the option holder's favor during the time remaining before the option expires.
times interest earned ...

~ of money
The ~ of money is the rate at which the value of money is traded off as a function of time. Because money can be invested to earn a return, economic values of the same dollar amount received at different times are not equivalent.
Timekeeping ...

~ of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar in the hand today can earn INTEREST during the time until the future dollar is received.
Tobin, James ...

~ of money - This relates to the concept that one \$ a person has today is worth more than a \$ that a person has tomorrow. It is based on the idea that a dollar can earn interest by putting it into a savings account or placing it in an alternative investment.

~ of money
The potential of an investment to increase in value through periodically compounded earnings.
Tip
An amount paid for a service beyond what’s required, usually to express satisfaction; also known as a gratuity.

~ or Extrinsic Value The amount that the current market price of a right, warrant or option exceeds its intrinsic value. Intrinsic value is the amount by which the market price of a security exceeds the price at which the warrant, right or option may be exercised.

~: The portion of an option premium that is attributed to the amount of time remaining until the option contract expires. ~ is whatever value the option has in addition to its intrinsic value.

~ vs. Intrinsic Value
by OI Staff
In the world of options Intrinsic value and ~ are parts that make up every option contract that you will buy or sell. To get a better understanding of them both, one needs to have a firm definition as to what they each mean.

~ of money
The ~ of money is money's potential to grow in value over time. Because of this potential, money that's available in the present is considered more valuable than the same amount in the future.

~ of money
Investments generate cash flow to the investor to compensate the investor for the ~ of money.

The ~ of money: this is the rate of interest that would induce a lender to enter into a
transaction in a risk-free environment. This amount would vary with the state of the economy, but would
be theoretical in nature, since risk is always involved.

~ of an option
The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time.

~ of money (TVM). In addition to keeping pace with inflation, the investor or lender has a natural inclination for consumption sooner rather than later. The cost of compensating for this aspect of human nature has been found to be about 1 to 2 percent per year.

~
The amount of an option premium that exceeds the intrinsic value of an in-the-money option. A call option with a strike price of 30, for example, has a premium of 3. If the underlying stock is at 32, the call has an intrinsic value of 2, and the ~ is 1.

~ - Has two general meanings. The first is the value or amount of a sum of money adjusted by an interest rate for a given time period. The second common usage is in the context of options.

~
Applies to derivative products. Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. ~ is positively related to the length of time remaining till expiration?
~ of an option ...

~
A phrase used in relation to options. ~ is any portion of the option premium over an above the intrinsic value.

The ~ of money
Risk aversion
The risk free rate of return, risk premia and yield spread
Diversification
NPV and DCF valuation
Dividend yield and flat yield.
Internal rate of return and yield to maturity
Compound growth
Valuation ...

It ignores ~ of money. Suppose, if we use ARR to compare two projects having equal initial investments.

Also called ~, the amount by which the option price exceeds its intrinsic value.
SEARCH: ...

Also known as ~. Extrinsic value is the price of an option minus its intrinsic value. As out of the money options have no intrinsic value, their option premium is based entirely on extrinsic value.
Fair Value or Theoretical Value ...

Compounding the ~ of money for separate time intervals.
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~
The concept that money now is worth more than money in the future, because money now can earn a return by being lent out. In valuing compani...(Read more)
Timely Execution ...

A measure of the ~ of money that fully reflects the effects of compounding.
The gross underwriting spread adjusted for the impact of the announcement of the common
stock offering on the firm's share price.

A measure of the ~ of money that fully reflects the effects of compounding.
Expensed
Charged to an expense account, fully reducing reported profit of that year, as is appropriate for expenditures for items with useful lives under one year.

Understanding The ~ Of Money
What Is A Small Cap Stock?
~ Of Money: Determining Your Future Worth
What Mutual Fund Market Cap Suits Your Style?

(See Chapter 16 The ~ of money and net present value of the Vernimmen)
To know more about it, look at what we have already written on this subject ...

PayablesRelated: Accounts payable PaybackThe length of time it takes to recover the initial cost of a project, without regard to the ~ of money.

Claim dilution A reduction in the likelihood one or more of the firm's claimants will be fully repaid, including ~ of money considerations. Claimant A party to an explicit or implicit contract.

Payback The length of time it takes to recover the initial cost of a project, without regard to the ~ of money. Paydown In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that of those sold. Used in the context of general equities.

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~ OF MONEY The effect that time and compound interest has on money. TIMING RISK A form of investment risk that the investor may buy or sell an investment at the wrong time.

The present value of a future payment, or the ~ of money, is what money is worth now in relation to what you think it'll be worth in the future based on expected earnings. For example, if you have a 10% return, \$1,000 is the present value of the \$1,100 you expect to have a year from now.

Option trading strategies: Can be market directional, volatility directional, market neutral, volatility neutral, ~ capture, ~ payment, and numerous variants of the aforementioned. The basic building blocks are puts and calls.

It ignores the ~ of money;
It is inflexible with respect to evaluating fluctuating income amounts during the project. Cash Payback Method ...

Prior to the option's expiration date, an at-the-money option also has ~. The ~ of an at-the-money option is influenced chiefly by the amount of time remaining until the expiration date.

Discounted payback is a way of calculating the payback period while taking into account the '~' of money.

DISCRETE COMPOUNDING - Compounding the ~ of money for separate time intervals.
DISCRETE RANDOM VARIABLE - A random variable that can take only a certain specified set of individual p...
DISCRETE VARIABLE - Variable like 1, 2, 3. Bond ratings are examples of discrete classifications.

Wasting Asset
1: Securities with a value that expires at a specified time in the future. The ~s of the securities deteriorate as their termination date approaches. Examples of wasting assets are option contracts, warrants and rights.
See: Options; Right; ~; Warrant ...

Importantly though, the buyer or the writer may independently terminate their outstanding positions before the expiration date, by executing offsetting transactions. The value of an option comprises a ~ and an INTRINSIC VALUE, the latter resulting from the price of the underlying stock.

Present value accounts for the ~ of money. The question is:
What is the value of several payments to be received over some future period, in terms of today's dollars?

Effective annual interest rate
An annual measure of the ~ of money that fully reflects the effects of compounding.
Effective annual yield
Annualized interest rate on a security computed using compound interest techniques.

It reflects the amount of ~ premium in the option for various stock prices, as well. The curve is generated by using a mathematical model. The delta (or hedge ratio) is the slope of a tangent line to the curve at a fixed stock price. See also Delta and Hedge Ratio
Source ...

The APR is adjusted for the ~ of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid in the future.

(music) a slur over two notes of the same pitch; indicates that the note is to be sustained for their combined ~ ...

Discrete Compounding definition :
Compounding the ~ of money for separate time intervals.
Your personal broking service FTSE 350 and Smallcap Share Service ...

TIME VALVE
Part of the option premium which reflects the excess over the
intrinsic value, or the entire premium if there is no intrinsic value.
At given price levels the option's ~ will decline until
expiration. It is this decrease in ~ that makes options a
wasting asset.

It is important to recognize the life~ of a client or customer instead of focusing only on a one-shot, money-making deal.

In life insurance, a method of comparing costs of similar policies by using an index that takes into account the ~ of money due at different times through interest adjustments to the annual premiums, dividends and cash value increases at an assumed interest rate.

Convergence
The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is usually higher because of ~. But as the contract nears expiration, and ~ decreases, the futures price and the cash price converge.

Discount rate: A finance term that represents a measure of the ~ of money.

Downstream division: The buying division in a transfer pricing scenario.

NPV properly discounts the cash flows while other methods may ignore the ~ of Money concepts. It is important to understand that the cash flows you are factoring in are not accounting profits which factor in depreciation.

Taxation/Definition
Thinking, fast and slow/Definition
Think tank/Definition
Third Way (U.S.)/Definition
~ of money/Definition
Toea/Definition
Tolar/Definition
Tracking error/Definition
Transnational spillover from weak and failed states/Definition ...

A technique for project appraisal, based on the length of time it takes to recover the initial cost required to undertake a project, without regard to the ~ (i.e. opportunity cost) of the money.
Français: Méthode de remboursement
Español: Método de reembolso, método de amortización ...

A measure of the interest cost of an issue that accounts for the ~ of money.

Discounted cash flow. A method of evaluating an investment by estimating future cash flows and taking into consideration the ~ of money.

Present Value: Representation of the current value of a future payment or serial payments at scheduled compounding periods with a specific discounting rate of return. Financial advisors may use the phrase "~ of money" while accountants might prefer "discounted cash flows."
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But talk to your CPA or financial advisor about the expected cash flows of your proposed investment and ask them to run a quick analysis on it for you. It's important to consider the ~ of money and they can show you how this works without too much problem.

More precisely, it means that stock prices change so that after an adjustment to reflect dividends, the ~ of money, and differential risk, they equal the market's best forecast of the future price.

Extrinsic Value
The price of an option less its intrinsic value. The entire premium of an out-of-the-money option consists of extrinsic value. It is therefore the option's ~.

this is the difference between the stock price and the strike price, if that difference is a positive number, or zero otherwise. For put options it is the difference between the strike price and the stock price, if that difference is positive, and zero otherwise. See also: In-the-Money, ~ ...

for using information and IT in marketing, with the ultimate goal of TEM is to allocate marketing resources to the activities, channels, and media with the best potential return and impact on profitable customer relationships. The new metrics of customer profitability, customer life~ and ...

See also: What is the meaning of Time value of money, Index, Transaction, Banks, Values?